Statistical Indicators

Precursor to Existing-Home Sales Heads Higher

Posted on Thursday, May 5, 2011

Precursor to Existing-Home Sales Heads Higher
Pending sales of existing homes rose again in March, according to data released Thursday by the National Association of Realtors (NAR).
The trade group’s monthly reading of contract signings – which is a forward-looking indicator of where sales of previously owned homes will likely be within one to two months – rose 5.1 percent in March.
With distressed properties now accounting for nearly half of the market’s sales activity, the pending sales reading points to an increase in REO and short sales in the coming months.
NAR described its latest assessment as another sign that the market’s recovery is proving to be “uneven, but a notable improvement.”
The trade group’s measurement of contract activity has risen in six of the past nine months. Reports of actual sales of previously owned homes have exhibited the same ups and downs.
“Since reaching a cyclical bottom last June, pending home sales have posted an overall gain of 24 percent and demonstrate the market is recovering on its own,” said Lawrence Yun, NAR’s chief economist.
“The index means modest near-term gains in existing-home sales are likely, which would be even stronger if tight mortgage lending criteria returned to normal, safe standards,” Yun added.
Contracts signings rose last month in every region of the country except the Northeast, where the pending sales index dropped 3.2 percent from the previous month, NAR said.
In the Midwest the index rose 3.0 percent in March. In the West pending home sales increased 3.1 percent, and in the South they jumped 10.3 percent.
“Based on the current uptrend with very favorable affordability conditions, rising apartment rents, and ongoing job creation, existing-home sales should rise around 5 to 10 percent this year with sales growth of lower priced homes likely to outperform high-end homes,” Yun said.
He explained that with more homes sold in the lower price range, it will ultimately translate to further declines in price trends.
“The good news,” Yun added, “is that recent homebuyers are staying well within budget, leading to exceptionally low loan default rates among homebuyers over the past two years.”
By: Carrie Bay DS NEWS

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